Tories' Bus Services Bill - potential risks for council tax and business rate payers, says Newcastle Lib Dem peer

Putting passengers first is of course the primary purpose of bus services and public transport generally, and we should always remember that, Lord Shipley told the House of Lords during a Second Reading debate on the Government's Bus Services Bill proposals .

One of the complaints about the current system is that some bus operators can make higher profits than is the case in London. Deregulation helped drive better passenger services in its early years but that is now a distant memory, and we need to look again at how the public interest can be best secured. For one thing, there is not much competition in most areas, although competition was one of the purposes of deregulation.

The Bill could enable major improvements to be delivered for passengers. Those improvements could include integrated planning of local transport services, through-ticketing, quicker identification of new services needed, greater stability in provision, more and newer buses, better timetable information and more control over fares. In addition, the Bill seems to address a number of the problems with the current quality contracts and quality partnerships legislation, in that it makes the process easier to deliver than the tests in current legislation, which create barriers. For example, the Bill now simply requires a mayoral combined authority to satisfy itself that a franchising scheme is appropriate and viable. The legislation contains language such as "include consideration of" rather than pass or fail language such as "must achieve", and that is important.

On risk management, I note that the Explanatory Notes say that the Government will not mandate which approach should be taken: bus franchising-the London system-voluntary partnerships, quality partnerships, advanced quality partnerships or enhanced partnerships. They are all different, which is to be welcomed because it enables local transport authorities to secure the best outcome for their areas based on their local knowledge.

While that is welcome, I noted the comment of the bus operators a few days ago to the effect that putting mayors in city hall offices in charge of running the buses when they have no experience could be a problem. Generally speaking, I do not subscribe to that view, because where there is a mayoral combined authority, expertise will exist-for example, it exists now with ITAs in securing services-and where there is not, the Secretary of State will in any case have to approve the scheme. However, even though the Government will not be mandating what happens, I hope they will start to advise at a very early stage in the planning of both partnerships and franchises across the country. That advice by the DfT could be very important.

The Bill may have simplified the set of tests required to proceed with a scheme. It will now be the relevant transport authority rather than an independent board that has to judge the viability of a scheme. This, of course, has the potential to be a two-edged sword. A few months ago, the independent board prevented the quality contract scheme proposed in Tyne and Wear proceeding, on the grounds of financial risk to the public purse. I noted the comments of the noble Lord, Lord Whitty, on this matter, but that decision was made by the quality contract scheme board, chaired by the traffic commissioner for the north-east. That is the current position.

When the Bill passes, if there is to be no independent check in the case of the mayoral combined authorities, as suggested in the Bill, at the very least there should be close involvement of DfT experts, giving advice to ensure that risk is properly managed. That is because getting it right matters. We do not want council tax payers or business rate payers-the Government are in the process of devolving business rates-to be exposed to unnecessary levels of risk, currently carried by the bus companies. For that reason, devolution of transport powers has to be managed with great care.

A franchising assessment must include consideration of the scheme's contribution to the implementation of the policies of the authority and neighbouring authorities, of how it would be made and operated, of whether the scheme is affordable and represents value for money, and of whether the procurement approach is viable. But who will assess whether the assessment has been properly done?

During the passage of the Cities and Local Government Devolution Bill, a number of changes were made by your Lordships' House, and accepted by the Government, on scrutiny, risk and audit of combined authorities. It needs to be made very clear in this Bill that scrutiny, risk management and audit must be a process independent of the mayoral combined authority's board so that proper investigation and evaluation are undertaken. The fact that the independent board required by current legislation will be no more could be a real difficulty if the scrutiny, risk and audit functions of combined authorities are inadequate. As my noble friend Lady Scott of Needham Market reminded us, all this is happening when government support for local authorities is being reduced and will go on being reduced, certainly in the lifetime of this Parliament. Therefore, great care will be needed.

I want to make three further points. I have noted that a council which is not part of a mayoral combined authority can introduce a franchising scheme in its area only with the approval of the Secretary of State. But what happens in a mayoral combined authority area where one of the councils that was expected to be part of it is not? I refer to the North East Combined Authority area, where Gateshead has declined to take part. However, buses will still run through that borough. On what terms will a council such as Gateshead, which is not part of a mayoral combined authority, be permitted to take part in the new structures? The Minister may be able to reply to that at the end of the debate but I understand that it may be necessary for him to consider it further. I am happy for him to write to me.

It has previously been mentioned that the Bus Services Bill retains the TUPEand pension protections of the current legislation to ensure the smooth transition of employee and employer rights. Interestingly, it requires the appointment of an independent auditor to verify the analysis of information in the franchising assessment. Perhaps that principle of independent audit, which in that context exists, ought to be extended much more widely, as I indicated earlier.

Can the Minister explain what is meant in the Bill by requiring a local transport authority to,

"facilitate the involvement of small and medium-sized operators", in the franchise? More detail is needed on exactly what is intended there. In many parts of the country there are some very big operators and, particularly in relation to school transport, some smaller operators. We need more detail to understand this commitment.

Overall, I welcome the Bill. It has benefited from the consideration that has been given to its drafting over the recent months since it was announced. It gives a set of options to local areas to make decisions that are best for them, and I welcome that flexibility. Although it is very much a skeleton Bill, I hope the Minister can clarify what the regulations will look like as we proceed through Committee and before we get to Report. I am also looking for assurances that they will come to this House in the form of the affirmative procedure. We did have problems with the Housing and Planning Bill; a number of changes were made and we did then get more information from the affirmative procedure. However, I hope that it will not be necessary to have those debates on this Bill in Committee.

As I say, I welcome the Bill, but there are caveats, and I worry very much indeed about the potential risk in it to council tax payers and business rate payers. We have to be very careful that, as schemes proceed, protections are built in to ensure that if there is franchising, or any form of partnership, the public interest in the form of public finance has been safeguarded.